Tata Power shares at Rs 500? What Axis Capital says on solar cell production, peers Adani, Premier Energies

As Tata Power Company Ltd commenced its solar cell production from its 2GW solar cell line in Tamil Nadu’s Tirunelveli, Axis Capital suggested ‘Add’ rating on the stock with a target price of Rs 500 apiece. India’s total cell manufacturing capacity stands at 9GW, out of which Adani Solar accounts 4GW capacity, Premier Energies 2GW, Tata Power 2.5 GW and Jupiter International and Websol Energy System the rest. This, Axis Capital said, is much lower than 25GW likely to be used in India in FY25 itself.

Axis Capital said as long as ALMM (approved list of models and manufacturers) for solar cell is not enforced, Tata Power has an opportunity to make higher returns by utilising its integrated module and cell capacity in DCR projects (in solar rooftop, solar pumps) or for export to US like peers Adani Solar and Premier Energies.

“These can afford much higher pricing against the landed cost of China imported modules (including import duties). Using a large portion of the TN cell plant for inhouse solar utility scale projects shall be suboptimal from a return standpoint as Tata Power-manufactured cell prices shall not be materially lower than direct China import rates (after including duties). Moreover,
revenue from solar manufacturing output used for inhouse projects (along with EPC income) gets eliminated on consolidation (and will not show up in P&L),” Axis Capital said.

The ‘saving’ in capital cost for inhouse projects (pre and post ALMM for solar cells) will afford better IRR over PPA period (25 years) for Tata Power, but does not show up in P&L in the near-term, it said.

On Tuesday, Tata Power shares settled 6.55 per cent higher at Rs 445.20 on BSE. The Tamil Nadu cell plant is seen adding another 2GW cell production capacity in the next 4-6 weeks and is expected to reach peak production within the next few months.

Axis Capital noted that module manufacturing capacity of 4.3GW at the same location was commissioned in October 2023 and the Tata group firm has produced 1.25GW of solar modules till date. The overall capital cost of the 4.3GW module & cell plant is Rs 4,300 crore, with over 70 per cent of the investment going into cell production facility.

“This plant shall be among India’s largest single-location integrated facilities and shall be run by an 80 per cent women workforce. Tata Power has an existing production capacity of 682MW for modules and 530MW cells in Bengaluru, Karnataka,” it said.

Axis Capital said the 4GW plant is likely to be fully ramped up and available starting FY26. The Tamil Nadu facility will initially cater to the company’s solar projects (913MW solar pipeline; 4,378MW solar wind hybrid pipeline).

“On an ongoing basis the plan is to utilize up to 2.5GW capacity p.a. for inhouse solar projects. They also plan to deploy ~1GW p.a. for solar rooftop projects (under PM Surya Ghar Yojana), which will have domestic content requirement (DCR) for both cells and modules. The TN plant, partly funded by US DFC loan ($150 million), is expected to get approvals for selling modules in US by end FY25; this is lowest in Tata Power’s end use plan,” Axis Capital said.

MNRE has notified draft norms for an approved list of models and manufacturers (ALMM) for solar cells from April 2026.